Interim Results for the half-year ended 30 June 2016
|
FINANCIAL HIGHLIGHTS
|
Half-year to 30 June
|
|
|
|
|
2016
|
2015
|
% change
|
% change
(constant
currency)
|
|
REVENUE
|
£450.5m
|
£434.5m
|
+4%
|
-1%
|
|
OPERATING PROFIT
|
£37.5m
|
£49.1m
|
-24%
|
-28%
|
|
ADJUSTED OPERATING PROFIT (1)
|
£47.2m
|
£56.2m
|
-16%
|
-20%
|
|
ADJUSTED OPERATING MARGIN (1)
|
10.5%
|
12.9%
|
-2.4ppts
|
-2.4ppts
|
|
PROFIT BEFORE TAX
|
£32.6m
|
£45.0m
|
-28%
|
-31%
|
|
ADJUSTED PROFIT BEFORE TAX (1)
|
£42.3m
|
£52.1m
|
-19%
|
-23%
|
|
BASIC EARNINGS PER SHARE
|
6.33p
|
8.45p
|
-25%
|
|
|
ADJUSTED EARNINGS PER SHARE (1)
|
8.07p
|
9.86p
|
-18%
|
|
|
INTERIM DIVIDEND PER SHARE
|
1.95p
|
1.84p
|
+6%
|
|
|
FREE CASH FLOW (2)
|
£17.3m
|
£24.7m
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-30%
|
|
|
NET DEBT (2) - JUNE
NET DEBT - DECEMBER 2015
|
£207.3m
|
£145.5m
£194.6m
|
+ £62m
+ £13m
|
|
Headlines
|
●
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Aerospace performance in line with expectations with good organic growth in large
commercial
|
|
●
|
Market conditions for the Flexonics Division remain subdued, mitigating actions
continue
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|
●
|
Adjusted profit before tax of £42.3m, 19% below prior year (23% decrease at constant
currency)
|
|
●
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Generated £17.3m free cash flow after investing £22.8m in capital expenditure for organic
growth
|
|
●
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Interim dividend increased by 6% to 1.95 pence per
share
|
|
●
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The Group is well positioned to increase market share and deliver strong growth over the
medium-term
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Commenting on the results, David Squires, Group Chief Executive of Senior plc, said:
"Senior's Aerospace Division has performed in line with expectations in the first half of
2016. Revenue and adjusted profits have increased and a book to bill ratio of 1.15 is encouraging. Conversely, as
previously announced, business conditions deteriorated in the Flexonics Division and resulted in a weak first half as end markets
remained challenging with no clear signs of recovery yet visible.
Overall the Group remains well positioned for the future with Aerospace production programmes
continuing to ramp-up and many new business opportunities in discussion with key customers. In Flexonics, despite the
challenging conditions, we have continued to secure positions on new programmes and platforms, and therefore are well positioned
to resume growth when markets recover. As previously announced, the Board expects the Group's performance in the second
half of 2016 to be stronger than the first half and is confident of progress in 2017 and beyond."
For further information please contact:
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Derek Harding, Group Finance Director, Senior plc
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01923 714722
|
|
Bindi Foyle, Head of Investor Relations & Leadership Development, Senior
plc
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01923 714725
|
|
Philip Walters, Finsbury Group
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020 7251 3801
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This Release, together with other information on Senior plc, may be found at: www.seniorplc.com
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(1)
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Adjusted figures are stated before a £9.8m charge for amortisation of intangible assets
arising on acquisitions (H1 2015 - £5.4m), acquisition costs of £nil (H1 2015 - £0.9m) and a profit on sale and
write-down of fixed assets of £0.1m (H1 2015 - loss £0.8m). Adjusted earnings per share takes account of the tax
impact of these items.
|
|
(2)
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See Notes 11(b) and 11(c) for derivation of free cash flow and of net debt,
respectively.
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The Group's principal exchange rates for the US dollar and the Euro, applied in the translation of
first-half revenue, profit and cash flow items at average rates were $1.42 (H1 2015 - $1.53) and €1.28 (H1 2015
- €1.36), respectively. The US dollar and Euro rates applied to the Balance Sheet at 30 June 2016 were $1.34 (June 2015 -
$1.57) and €1.20 (June 2015 - €1.41), respectively.
Webcast
There will be a presentation on Monday 1 August 2016 at 11.00am BST, with a live webcast that is
accessible on Senior's website at www.seniorplc.com/investors. The webcast will be made
available on the website for subsequent viewing.
Note to Editors
Senior is an international manufacturing Group with operations in 14 countries. It is listed
on the main market of the London Stock Exchange (symbol SNR). Senior designs, manufactures and markets high technology
components and systems for the principal original equipment producers in the worldwide aerospace, defence, land-vehicle and
energy markets.
Cautionary Statement
This Interim Management Report ("IMR") has been prepared solely to provide additional information
to enable shareholders to assess the Group's strategy and business objectives and the potential for the strategy and objectives
to be fulfilled. It should not be relied upon by any other party or for any other purpose.
This IMR contains certain forward-looking statements. Such statements have been made by the
Directors in good faith based on information available to them at the time of their approval of this Report. These
statements should therefore be treated with caution due to the inherent uncertainties, including both economic and business risk
factors, underlying such forward-looking information.
INTERIM MANAGEMENT REPORT 2016
Overview
Group revenue increased by 3.7% to £450.5m (H1 2015 - £434.5m). This included a favourable
exchange rate impact of £21.5m and a beneficial incremental impact from acquisitions of £18.6m. Underlying Group revenue
from organic operations was down £24.1m (5.3%) on a constant currency basis as growth from the Aerospace Division was offset by
lower Flexonics revenue due to weaker truck and off-highway, and oil and gas markets.
Adjusted operating profit decreased by £9.0m (16.0%) to £47.2m (H1 2015 - £56.2m). This
included a favourable exchange rate impact of £2.7m and £2.0m of operating profit contributed by acquisitions. Adjusted
operating profit from organic operations decreased by 23.3% on a constant currency basis. Whilst the Group continues to
focus on operational improvements, cost management and efficiency initiatives, as previously disclosed, margins in the first half
of 2016 were impacted by the reduction in volumes and change in mix in the Flexonics Division, as well as the ramp-up of new
aircraft production programmes in the Aerospace Division. These resulted in the Group's adjusted operating margin reducing
by 2.4 percentage points to 10.5%.
Adjusted profit before tax decreased to £42.3m (H1 2015 - £52.1m), down 18.8%, or 22.5% on
a constant currency basis. Adjusted earnings per share decreased by 18.2% to 8.07
pence (H1 2015 - 9.86 pence).
The Group generated free cash inflow of £17.3m (H1 2015 - £24.7m) after gross investment in
capital expenditure of £22.8m (H1 2015 - £23.3m). The level of net debt at the end of June 2016 was £207.3m (December 2015
- £194.6m). This increase was principally due to unfavourable currency movements of £12.2m and
£18.3m of dividend payments partly offset by free cash inflow of £17.3m and proceeds on disposal of business of
£1.5m. The ratio of net debt to EBITDA at the end of June 2016 was 1.6x, comfortably below the
Group's bank covenant level of 3.0x.
Recognising the underlying strength of the business and its future prospects, the Board has
approved an interim dividend of 1.95 pence per share, an increase of 6.0% over the prior year (H1 2015 -
1.84 pence). It will be paid on 30 November 2016 to shareholders on the register at the close of
business on 21 October 2016.
Market conditions
The production ramp-up of new engine option single-aisle and wide-body aircraft means the outlook
for the large commercial aerospace sector is both strong and visible. Demand for large commercial aircraft remains robust
with Boeing and Airbus predicting air traffic to grow in excess of 4% per annum over the next 20 years. Boeing is
forecasting market demand for over 39,000 large commercial aircraft and Airbus is forecasting market demand for over 33,000 large
commercial aircraft over the next 20 years.
Senior has healthy shipset content on all the key large commercial aircraft platforms and has
further increased its content on the new engine versions in the first half of this year. With significantly higher content
on the new engine A320neo, 737 MAX and A330neo than the current engine versions, the Group will outgrow the market, as these new
engine versions come into service and production ramps up. Customer deliveries of the A320neo began in
January 2016, whilst the 737 MAX and A330neo are scheduled to enter service in 2017.
In the regional jet market, the first CSeries was delivered to Swiss International Air Lines in
June, followed by its maiden commercial flight on 15 July 2016. Senior has a healthy level of content on the CSeries
airframe and its Pratt & Whitney Geared Turbo Fan engine and is also expected to benefit from the Mitsubishi MRJ and Embraer
E2-Jet, which are anticipated to enter into service in 2018. In the defence sector, military spending has stabilised and
Senior is well positioned on the key growth platforms, particularly the Joint Strike Fighter which is scheduled to ramp-up
significantly between now and the end of the decade.
In the Flexonics Division, market conditions in North American truck and off-highway and oil and
gas markets remain challenging. Production of North American heavy-duty diesel trucks is forecast to decline in 2016 and
2017, and the off-highway market is expected to remain weak. Oil and gas related markets remain challenging in the near
term as investment in the sector is reduced or postponed.
Despite this, Senior Flexonics continues to bid for and win new opportunities with existing and
new customers. In order to remain competitive and reduce costs, more work is being directed to cost competitive Flexonics
facilities in Mexico, India, Czech Republic, Malaysia and China. As a consequence, when the cyclical markets do pick up,
Senior will see strengthening performance from an ever-more lean and competitive business.
Operational review
In response to the challenging market conditions faced by the Flexonics Division, during the first
half of 2016, there has been continuing focus on both short-term cost management actions, as well as an acceleration of
longer-term structural cost improvement initiatives.
Near-term cost management actions have included headcount reductions, reduced overtime,
discretionary spend management and supply chain cost out activity. In Flexonics, total payroll costs have reduced by
15% from end of June 2015 to end of June 2016. In certain businesses most affected by the
challenging market conditions, headcount has reduced by up to 30%.
Longer-term structural cost improvements are centred around Senior's cost competitive country
strategy. Production continues to be transferred to new facilities in Mexico, India and the Czech Republic. For
example, all production has now been transferred from our Flexonics site in the UK, with the last programme and equipment having
moved to India. This will enable the Group to establish a specialist technology, development and test centre in a smaller,
less expensive facility in the UK. During the second half of 2016 additional common rail and cooler products and associated
equipment are being transferred to Mexico from our facility in Chicago. In India, EGR coolers are now being manufactured
for an off-highway customer and production of fuel rails will launch for a truck customer at the end of 2016.
On the Aerospace side, Senior's global footprint continues to provide opportunities for growth, as
a result of the Group's investment in our Aerospace facilities in Thailand, Malaysia, Mexico, California and South Carolina.
Plans are being developed to add aerospace capability to our existing highly efficient Flexonics plant in the Czech
Republic. The new 200,000 sq.ft. facility in Thailand was officially opened on 23 June 2016 with key customers in
attendance and we are encouraged by the opportunities for organic growth that this facility brings.
Senior Aerospace has continued with its targeted capital investment in its operating
businesses. New state-of-the-art high speed and high performance equipment has been installed at many of our sites around
the world in response to increasing customer demand. This new equipment gives a step function improvement in set-up times
and machining speeds which in turn reduces costs and helps our operating businesses to be highly competitive and operationally
efficient and effective.
Finally, the integration of Steico is going well and has benefitted from the new post-acquisition
integration process introduced in the second half of 2015. We are pleased with its contribution to the Group in the first
half, which was fully in line with the acquisition case.
Outlook
Overall the Group remains well positioned for the future with Aerospace production programmes
continuing to ramp-up and many new business opportunities in discussion with key customers. In Flexonics, despite the
challenging conditions, we have continued to secure positions on new programmes and platforms, and therefore are well positioned
to resume growth when markets recover. As previously announced, the Board expects the Group's performance in the second
half of 2016 to be stronger than the first half and is confident of progress in 2017 and beyond.
DIVISIONAL REVIEW
Aerospace Division
The Aerospace Division represents 72% (H1 2015 - 66%) of Group revenue and consists of 19
operations. These are located in North America (ten), the United Kingdom (four), continental Europe (three), Thailand and
Malaysia. The Division's operating results on a constant currency basis are summarised below:
|
|
Half-year
ended
30 June
2016
|
|
Half-year
ended
30 June
2015
|
(1)
|
Change
|
|
|
£m
|
|
£m
|
|
|
|
Revenue
|
323.8
|
|
302.7
|
|
+7.0%
|
|
Adjusted operating profit
|
41.1
|
|
39.8
|
|
+3.3%
|
|
Adjusted operating margin
|
12.7%
|
|
13.1%
|
|
-0.4ppts
|
|
(1) H1 2015 results translated using H1 2016 average
exchange rates - constant currency.
|
Divisional revenue increased by £21.1m (7.0%) to £323.8m (H1 2015 - £302.7m(1)) whilst
adjusted operating profit increased by £1.3m (3.3%) to £41.1m (H1 2015 - £39.8m(1)). Excluding the incremental
contribution from Steico, acquired in December 2015 (revenue of £14.3m; operating profit of £2.3m), organic revenue for the
Division increased by £6.8m (2.2%) whilst adjusted operating profit decreased by £1.0m (2.5%) over the first half of
2015.
|
Revenue Reconciliation
|
£m
|
|
H1 2015 revenue(1)
|
302.7
|
|
Large commercial
|
17.2
|
|
Regional & business jets
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(3.7)
|
|
Military
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(3.8)
|
|
Other
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(2.9)
|
|
H1 2016 organic
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309.5
|
|
Acquisitions
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14.3
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|
H1 2016 revenue
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323.8
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The Division's most important market is large commercial aircraft where Boeing and Airbus
collectively delivered 673 aircraft in the first half of 2016, 1.8% less than the prior year. Senior's sales in the large
commercial aircraft sector increased by 12.3%(1) during the six-month period to 30 June 2016, with organic growth,
excluding acquisitions, being 9.6%. The Group benefited from increased production of the A350 and A320neo, which began
customer deliveries in January 2016, and from higher deliveries of the 787; however, these increases were partly offset by the
comparative impact of the decline in A330 build rates.
The Division's sales to the regional jet market, excluding acquisitions, increased by 34.5% in the
period(1), mainly as a result of increased production of Bombardier's CSeries, which commenced customer deliveries in
June 2016, and increased revenue from the Mitsubishi Regional Jet programme which is expected to commence deliveries to
customers in 2018. Revenue derived from the business jet sector declined by 31.8%, on an organic
basis, in the period(1) due to previously announced reductions in build rates of Bombardier's Global 5000/6000 and
Gulfstream's G550 programmes.
Total revenue from the military and defence sector increased by 4.5% during the
period(1), however excluding acquisitions, organic revenue decreased by 6.6% primarily due to lower Joint Strike
Fighter content as a work package was dual sourced as previously noted, and lower deliveries of the CH-47 Chinook.
Around 8% of the Aerospace Division's revenue was derived from other markets such as space,
non-military helicopters, power and energy, medical and semi-conductor equipment, where the Group manufactures products using
very similar technology to that used for certain aerospace products. Excluding acquisitions, revenue derived from these
markets decreased by 9.6%(1), mainly due to weaker power and energy markets.
The divisional adjusted operating margin declined by 0.4 percentage points to 12.7% (H1 2015 -
13.1%)(1). Margins were impacted by the year-on-year volume reductions on mature
programmes such as the A330, Global 5000/6000 and G550, and costs associated with the ramp-up of new aircraft production
programmes such as the A320neo and CSeries. Improvement in performance is anticipated in the second
half of this year driven by increasing revenues and operational improvements.
Senior has a healthy level of content on the A320neo, 737 MAX, A330neo, A350, and Joint Strike
Fighter, all of which are forecasting significant increases in production over the coming years. The Group will also
benefit from greater content on the new engine aircraft, with 66% more content on the A320neo, 52% more on the
737 MAX, 24% more on the A330neo and 67% more on Embraer's E2-Jets, than their respective current engine versions. Customer
deliveries of the A320neo began in January 2016, whilst the 737 MAX and A330neo are scheduled to enter service in 2017 and the
E2-Jet in 2018.
Overall the future prospects for the Group's Aerospace Division are visible and remain
strong.
Flexonics Division
The Flexonics Division represents 28% (H1 2015 - 34%) of Group revenue and consists of 14
operations which are located in North America (four), continental Europe (three), the United Kingdom (two), South Africa, India,
Brazil, Malaysia and China where the Group also has a 49% equity stake in a land vehicle joint venture. The Division's
operating results on a constant currency basis are summarised below:
|
|
Half-year
ended
30 June
2016
|
|
Half-year
ended
30 June
2015
|
(1)
|
Change
|
|
|
£m
|
|
£m
|
|
|
|
Revenue
|
126.9
|
|
153.5
|
|
-17.3%
|
|
Adjusted operating profit
|
10.8
|
|
23.2
|
|
-53.4%
|
|
Adjusted operating margin
|
8.5%
|
|
15.1%
|
|
-6.6ppts
|
|
(1) H1 2015 results translated using H1 2016 average
exchange rates - constant currency.
|
Divisional revenue decreased by £26.6m (17.3%) to £126.9m (H1 2015 - £153.5m(1)) and
adjusted operating profit decreased by £12.4m (53.4%) to £10.8m (H1 2015 - £23.2m(1)). Excluding the incremental
contribution from the acquisition of LPE at the end of March 2015 (revenue of £4.3m; operating loss of £0.3m), organic revenue
for the Division declined by £30.9m (20.1%) and adjusted operating profit decreased by £12.1m (52.2%).
|
Revenue Reconciliation
|
£m
|
|
H1 2015 revenue(1)
|
153.5
|
|
Truck and off-highway
|
(13.2)
|
|
Passenger vehicles
|
(0.4)
|
|
Industrial
|
(17.2)
|
|
Other
|
(0.1)
|
|
H1 2016 organic
|
122.6
|
|
Acquisitions
|
4.3
|
|
H1 2016 revenue
|
126.9
|
Group sales to truck and off-highway markets decreased by 24.9%(1). Senior's
sales to the North American truck market decreased by £11.0m (35.6%), primarily due to lower sales of EGR coolers for new
vehicles as market production declined and sales to the North American off-highway market decreased by £4.3m (31.4%) due to
weaker demand for agricultural and mining vehicles. Sales to European truck and off-highway markets grew by £1.4m (20.3%)
due to launch and ramp-up of new programmes, including EGR coolers to new customers. The Group also benefited by £0.7m
(43.8%) increased sales from new truck and off-highway programmes in India and China.
Group sales to passenger vehicle markets decreased slightly by £0.4m (1.5%) in the
period(1), with growth of £1.2m (6.3%) in the Division's main European market and growth of £0.3m (18.8%) from new
programme launches in India, offset by some North American programmes ending and weaker market demand in
Brazil.
In the Group's industrial markets, organic sales excluding the incremental contribution from LPE
were down 24.3%(1). As anticipated, organic sales to petrochemical markets were down £14.1m (41.6%) due to lower
demand and the non-repeat of the large industrial expansion joint orders for North American and South Korean petrochemical
projects from 2015. Organic sales to power and energy markets decreased by £4.1m (20.3%) due to continued weakness in North
American coal and gas fired power generation markets and the year-on-year impact of lower revenue from fuel cell
dielectrics.
The adjusted operating margin decreased to 8.5% (H1 2015 - 15.1%). On an organic basis,
excluding acquisitions, the margin declined by 6.0 percentage points to 9.1%, principally due to volume
reductions in truck, off-highway and oil and gas markets and change in mix. The Group continues to focus on cost management
and efficiency initiatives and these are anticipated to provide some improvement in Flexonics performance in the second half of
this year.
Looking further ahead, global environmental legislation continues to tighten and coupled with
projected increases in global energy usage, will drive increased demand for many of the Flexonics Division's products.
Senior is developing solutions for the next generation of diesel engines, as well as alternative energy applications. As a
result of its global footprint, technical innovation and customer relationships, the Group remains well positioned for the future
as new Flexonics programmes and products enter production.
OTHER FINANCIAL INFORMATION
Finance costs
Total finance costs, net of investment income of £0.1m (H1 2015 - £0.1m), increased to £4.9m (H1
2015 - £4.1m). Net interest costs on borrowings increased to £4.8m (H1 2015 - £3.9m) due to the increased debt associated
with the acquisitions of Steico and LPE and the adverse foreign exchange impact on the translation of US dollar denominated
borrowings. The net IAS 19 pension finance cost decreased to £0.1m (H1 2015 - £0.2m) principally due to a reduction in the retirement benefit obligations at 31 December 2015 compared to 31 December
2014.
Tax charge
The total tax charge decreased to £6.1m (H1 2015 - £9.7m). Excluding the net tax benefits of
£2.4m (H1 2015 - £1.2m) arising from amortisation of intangible assets from acquisitions, acquisition costs and profit or loss on
sale and write-down of fixed assets, the adjusted tax charge is £8.5m (H1 2015 - £10.9m) resulting in an adjusted tax rate of
20.0% (H1 2015 - 21.0%) on adjusted profit before tax.
Earnings per share
The weighted average number of shares, for the purposes of calculating undiluted earnings per
share, increased to 418.8 million (H1 2015 - 417.8 million). The increase
arose principally from the vesting of shares awarded under the Group's Long-Term Incentive Plan. Adjusted earnings per
share decreased by 18.2% to 8.07 pence (H1 2015 - 9.86 pence). Basic
earnings per share decreased by 25.1% to 6.33 pence (H1 2015 - 8.45 pence). See Note 7 of the Interim Financial Statements for details of the basis of these
calculations.
Working capital
Working capital increased from 15.1% of sales at 31 December 2015 to 17.3% of sales at 30 June
2016. 0.6% of this increase was due to exchange differences resulting from the significant
fluctuation in spot exchange rates at the balance sheet date compared to the average exchange rate over the past 12 months.
The remaining increase was primarily driven by holding additional inventory to support new product introductions and
product re-location to cost competitive countries, while movements in receivables and payables broadly offset.
Capital expenditure
Capital expenditure of £22.8m (H1 2015 - £23.3m) was 1.4 times depreciation (H1 2015 - 1.7 times),
with the majority of the spend related to investment in growth programmes in the Aerospace Division. In particular, £5.1m
was invested in our new Thailand facility and £1.7m invested in Malaysia both supporting A350 and 787 programmes. In the
USA, £2.4m was invested to support the increasing build rate on 737. Capital expenditure is expected to continue to be
significantly higher than depreciation in the second half of the year, as major investments continue, supporting future growth
programmes.
Retirement benefit obligations
Aggregate retirement benefit liabilities at 30 June 2016 were £17.0m in excess of the value of
pension assets, representing an increase in the deficit of £4.4m from 31 December 2015. The deficit in respect of the
Group's UK defined benefit pension plan increased by £2.1m to £2.7m (31 December 2015 - £0.6m). The deficit in North
America and other territories increased by £2.3m. The £4.4m net increase over the first six months of 2016 is principally
due to the decrease in the bond yields used to place a value on the defined benefit obligation partially offset by £4.4m
contributions in excess of service costs made by the Group.
Audit tender
As set out in the Annual Report & Accounts 2015 the Group undertook a formal tender of its
external audit during the first half of 2016, led by the Audit Committee. The process began in March 2016 with a selected
number of audit firms receiving an invitation to tender; Deloitte LLP, the Group's current external auditor, was not invited to
tender due to the longevity of its appointment. The process involved access to a data room, detailed meetings with
management, selected site visits and a final presentation to the Audit Committee by each shortlisted firm. Following its
conclusion, the Board proposes the appointment of KPMG LLP as the Group external auditor for the financial year commencing 1
January 2017, subject to approval by shareholders at the Annual General Meeting to be held in April 2017. Deloitte will
complete the external audit for the year ending 31 December 2016 and a hand over process will take place during that time-frame.
The Board extends its appreciation to Deloitte for their contribution over many years.
Related party transactions
The Group's related party transactions are between the Company and its subsidiaries, and have been
eliminated on consolidation.
Going concern basis
The Directors have made appropriate enquiries and consider that the Group has adequate resources
to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going
concern basis in preparing the financial statements.
Risks and uncertainties
The principal risks and uncertainties faced by the Group have not changed from those set out in
detail on pages 30 to 31 of the Annual Report & Accounts 2015, which is available at www.seniorplc.com. These can be summarised as:
|
●
|
New aircraft platform delays
|
|
●
|
Importance of emerging markets
|
|
●
|
Price-down pressures
|
|
●
|
Acquisitions
|
|
●
|
Strategy
|
|
●
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Programme participation
|
|
●
|
Employee retention
|
|
●
|
Corporate governance breach
|
|
●
|
Financing and liquidity
|
|
●
|
Global cyclical downturn
|
Overall, the Board does not anticipate any significant change in the likely impact of these risks.
The Board is monitoring events following the 23 June EU Referendum and will reflect any resulting changes to its assessment
of risks and uncertainties when the consequences of the decision to leave the EU are more visible.
Directors' Responsibility Statement
We confirm to the best of our knowledge that:
|
1.
|
the condensed set of Interim Financial Statements has been prepared in accordance with IAS
34 "Interim Financial Reporting" as adopted by the European Union;
|
|
2.
|
the Interim Management Report herein includes a fair review of the
important events during the first six months and description of the principal risks and uncertainties for the remaining
six months of the year, as required by Rule 4.2.7R of the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority; and
|
|
3.
|
the Interim Management Report includes as applicable, a fair review of disclosure of
related party transactions and changes therein, as required by Rule 4.2.8R of the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
|
By Order of the Board
|
David Squires
|
Derek Harding
|
|
Group Chief Executive
|
Group Finance Director
|
|
29 July 2016
|
29 July 2016
|
INDEPENDENT REVIEW REPORT TO SENIOR PLC
We have been engaged by Senior plc ("the Company") to review the condensed set of Financial
Statements in the half-yearly financial report for the six months ended 30 June 2016 which comprises the Condensed Consolidated
Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet,
Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Cash Flow Statement and related Notes 1 to 15.
We have read the other information contained in the half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the information in the condensed set of Financial Statements.
This report is made solely to the Company in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent
Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the Company those matters we are required to state to it in an independent review report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our
review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure
and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in Note 2, the annual Financial Statements of the Group are prepared in accordance
with IFRSs as adopted by the European Union. The condensed set of Financial Statements included in this half-yearly
financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as
adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial
statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and
Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries,
primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK
and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the
condensed set of Financial Statements in the half-yearly financial report for the six months ended 30 June 2016 is not prepared,
in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the
Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
29 July 2016
Condensed Consolidated Income Statement
For the half-year ended 30 June 2016
|
|
Notes
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2015
|
Year
ended
31 Dec
2015
|
|
|
|
£m
|
£m
|
£m
|
|
Revenue
|
3
|
450.5
|
434.5
|
849.5
|
|
|
|
|
|
|
|
Trading profit before one-off items
|
|
37.2
|
49.7
|
94.0
|
|
Goodwill impairment
|
|
-
|
-
|
(18.8)
|
|
Impairment of assets held for sale
|
|
-
|
-
|
(1.8)
|
|
Trading profit
|
|
37.2
|
49.7
|
73.4
|
|
Profit/(loss) on sale and write-down of fixed assets
|
|
0.1
|
(0.8)
|
(1.5)
|
|
Share of joint venture profit
|
3
|
0.2
|
0.2
|
0.4
|
|
Operating profit (1)
|
|
37.5
|
49.1
|
72.3
|
|
Investment income
|
|
0.1
|
0.1
|
0.3
|
|
Finance costs
|
|
(5.0)
|
(4.2)
|
(8.8)
|
|
Profit before tax (2)
|
|
32.6
|
45.0
|
63.8
|
|
Tax
|
5
|
(6.1)
|
(9.7)
|
(15.3)
|
|
Profit for the period
|
|
26.5
|
35.3
|
48.5
|
|
Attributable to:
|
|
|
|
|
|
Equity holders of the parent
|
|
26.5
|
35.3
|
48.5
|
|
Earnings per share
|
|
|
|
|
|
Basic (3)
|
7
|
6.33p
|
8.45p
|
11.59p
|
|
Diluted (4)
|
7
|
6.26p
|
8.35p
|
11.47p
|
|
(1) Adjusted operating profit
|
4
|
47.2
|
56.2
|
107.8
|
|
(2) Adjusted profit before tax
|
4
|
42.3
|
52.1
|
99.3
|
|
(3) Adjusted earnings per share
|
7
|
8.07p
|
9.86p
|
18.98p
|
|
(4) Adjusted and diluted earnings per share
|
7
|
7.98p
|
9.75p
|
18.78p
|
Condensed Consolidated Statement of Comprehensive Income
For the half-year ended 30 June 2016
|
|
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2015
|
Year
ended
31 Dec
2015
|
|
|
|
£m
|
£m
|
£m
|
|
Profit for the period
|
|
26.5
|
35.3
|
48.5
|
|
Other comprehensive income:
|
|
|
|
|
|
Items that may be reclassified subsequently to profit or loss:
|
|
|
|
|
|
Losses on cash flow hedges during the period
|
|
(3.7)
|
(0.9)
|
(5.6)
|
|
Reclassification adjustments for losses included in profit or loss
|
|
0.4
|
1.2
|
3.8
|
|
(Losses) / gains on cash flow hedges
|
|
(3.3)
|
0.3
|
(1.8)
|
|
Foreign exchange gain recycled to the Income Statement on disposal of business
|
|
(0.4)
|
-
|
-
|
|
Exchange differences on translation of foreign operations
|
|
41.4
|
(12.8)
|
(4.3)
|
|
Tax relating to items that may be reclassified
|
|
1.1
|
-
|
0.4
|
|
|
|
38.8
|
(12.5)
|
(5.7)
|
|
Items that will not be reclassified subsequently to profit or loss:
|
|
|
|
|
|
Actuarial losses on defined benefit pension schemes
|
|
(7.2)
|
-
|
(1.1)
|
|
Tax relating to items that will not be reclassified
|
|
1.6
|
0.4
|
0.8
|
|
|
|
(5.6)
|
0.4
|
(0.3)
|
|
|
|
|
|
|
|
Other comprehensive income for the period, net of tax
|
|
33.2
|
(12.1)
|
(6.0)
|
|
Total comprehensive income for the period
|
|
59.7
|
23.2
|
42.5
|
|
Attributable to:
|
|
|
|
|
|
Equity holders of the parent
|
|
59.7
|
23.2
|
42.5
|
Condensed Consolidated Balance Sheet
|
As at 30 June 2016
|
Notes
|
30 June 2016
|
30 June 2015
|
31 Dec 2015
|
|
|
|
£m
|
£m
|
£m
|
|
Non-current assets
|
|
|
|
|
|
Goodwill
|
8
|
305.8
|
275.2
|
284.5
|
|
Other intangible assets
|
|
67.6
|
50.3
|
72.1
|
|
Investment in joint venture
|
|
1.2
|
0.9
|
1.1
|
|
Property, plant and equipment
|
9
|
233.5
|
175.7
|
206.6
|
|
Deferred tax assets
|
|
8.2
|
1.1
|
6.7
|
|
Loan to joint venture
|
|
0.3
|
0.7
|
1.1
|
|
Trade and other receivables
|
|
0.4
|
0.4
|
0.3
|
|
Total non-current assets
|
|
617.0
|
504.3
|
572.4
|
|
Current assets
|
|
|
|
|
|
Inventories
|
|
147.0
|
120.7
|
126.9
|
|
Loan to joint venture
|
|
1.0
|
0.4
|
0.1
|
|
Current tax receivables
|
|
2.2
|
0.3
|
5.1
|
|
Trade and other receivables
|
|
168.6
|
147.7
|
140.6
|
|
Cash and bank balances
|
11a)
|
13.5
|
22.0
|
14.4
|
|
Asset classified as held for sale
|
|
-
|
-
|
1.8
|
|
Total current assets
|
|
332.3
|
291.1
|
288.9
|
|
Total assets
|
|
949.3
|
795.4
|
861.3
|
|
Current liabilities
|
|
|
|
|
|
Trade and other payables
|
|
164.5
|
149.9
|
138.2
|
|
Current tax liabilities
|
|
20.3
|
15.8
|
20.5
|
|
Obligations under finance leases
|
11c)
|
0.7
|
0.7
|
0.8
|
|
Bank overdrafts and loans
|
11c)
|
65.3
|
41.6
|
28.6
|
|
Provisions
|
|
1.8
|
1.7
|
1.4
|
|
Liabilities classified as held for sale
|
|
-
|
-
|
1.1
|
|
Total current liabilities
|
|
252.6
|
209.7
|
190.6
|
|
Non-current liabilities
|
|
|
|
|
|
Bank and other loans
|
11c)
|
154.1
|
123.7
|
178.6
|
|
Retirement benefit obligations
|
12
|
17.0
|
15.1
|
12.6
|
|
Deferred tax liabilities
|
|
52.5
|
26.7
|
46.9
|
|
Obligations under finance leases
|
11c)
|
0.7
|
1.5
|
1.0
|
|
Others
|
|
0.7
|
0.5
|
0.7
|
|
Total non-current liabilities
|
|
225.0
|
167.5
|
239.8
|
|
Total liabilities
|
|
477.6
|
377.2
|
430.4
|
|
Net assets
|
|
471.7
|
418.2
|
430.9
|
|
Equity
|
|
|
|
|
|
Issued share capital
|
10
|
41.9
|
41.9
|
41.9
|
|
Share premium account
|
|
14.8
|
14.8
|
14.8
|
|
Equity reserve
|
|
3.6
|
3.2
|
4.5
|
|
Hedging and translation reserve
|
|
25.9
|
(19.7)
|
(12.9)
|
|
Retained earnings
|
|
387.2
|
380.2
|
384.7
|
|
Own Shares
|
|
(1.7)
|
(2.2)
|
(2.1)
|
|
Equity attributable to equity holders of the parent
|
|
471.7
|
418.2
|
430.9
|
|
Total equity
|
|
471.7
|
418.2
|
430.9
|
Condensed Consolidated Statement of Changes in Equity
For the half-year ended 30 June 2016
|
|
All equity is attributable to equity holders of the parent
|
|
|
Issued
share
capital
|
Share
premium
account
|
Equity
reserve
|
Hedging
and
translation
reserve
|
Retained
earnings
|
Own
shares
|
Total
equity
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Balance at 1 January 2015
|
41.8
|
14.8
|
5.7
|
(7.2)
|
359.0
|
(2.5)
|
411.6
|
|
Profit for the period
|
-
|
-
|
-
|
-
|
48.5
|
-
|
48.5
|
|
Losses on cash flow hedges
|
-
|
-
|
-
|
(1.8)
|
-
|
-
|
(1.8)
|
|
Exchange differences on translation of foreign operations
|
-
|
-
|
-
|
(4.3)
|
-
|
-
|
(4.3)
|
|
Actuarial losses on defined benefit pension schemes
|
-
|
-
|
-
|
-
|
(1.1)
|
-
|
(1.1)
|
|
Tax relating to components of other comprehensive income
|
-
|
-
|
-
|
0.4
|
0.8
|
-
|
1.2
|
|
Total comprehensive income for the period
|
-
|
-
|
-
|
(5.7)
|
48.2
|
-
|
42.5
|
|
Issue of share capital
|
0.1
|
-
|
(0.1)
|
-
|
-
|
-
|
-
|
|
Share-based payment charge
|
-
|
-
|
2.2
|
-
|
-
|
-
|
2.2
|
|
Tax relating to share-based payments
|
-
|
-
|
-
|
-
|
(0.2)
|
-
|
(0.2)
|
|
Purchase of shares held by employee benefit trust
|
-
|
-
|
-
|
-
|
-
|
(0.9)
|
(0.9)
|
|
Use of shares held by employee benefit trust
|
-
|
-
|
-
|
-
|
(1.3)
|
1.3
|
-
|
|
Transfer to retained earnings
|
-
|
-
|
(3.3)
|
-
|
3.3
|
-
|
-
|
|
Dividends paid
|
-
|
-
|
-
|
-
|
(24.3)
|
-
|
(24.3)
|
|
Balance at 31 December 2015
|
41.9
|
14.8
|
4.5
|
(12.9)
|
384.7
|
(2.1)
|
430.9
|
|
Profit for the period
|
-
|
-
|
-
|
-
|
26.5
|
-
|
26.5
|
|
Losses on cash flow hedges
|
-
|
-
|
-
|
(3.3)
|
-
|
-
|
(3.3)
|
|
Foreign exchange gain recycled to the Income Statement on disposal of business
|
-
|
-
|
-
|
(0.4)
|
-
|
-
|
(0.4)
|
|
Exchange differences on translation of foreign operations
|
-
|
-
|
-
|
41.4
|
-
|
-
|
41.4
|
|
Actuarial losses on defined benefit pension schemes
|
-
|
-
|
-
|
-
|
(7.2)
|
-
|
(7.2)
|
|
Tax relating to components of other comprehensive income
|
-
|
-
|
-
|
1.1
|
1.6
|
-
|
2.7
|
|
Total comprehensive income for the period
|
-
|
-
|
-
|
38.8
|
20.9
|
-
|
59.7
|
|
Issue of share capital
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Share-based payment charge
|
-
|
-
|
0.4
|
-
|
-
|
-
|
0.4
|
|
Purchase of shares held by employee benefit trust
|
-
|
-
|
-
|
-
|
-
|
(1.0)
|
(1.0)
|
|
Use of shares held by employee benefit trust
|
-
|
-
|
-
|
-
|
(1.4)
|
1.4
|
-
|
|
Transfer to retained earnings
|
-
|
-
|
(1.3)
|
-
|
1.3
|
-
|
-
|
|
Dividends paid
|
-
|
-
|
-
|
-
|
(18.3)
|
-
|
(18.3)
|
|
Balance at 30 June 2016
|
41.9
|
14.8
|
3.6
|
25.9
|
387.2
|
(1.7)
|
471.7
|
|
|
All equity is attributable to equity holders of the parent
|
|
|
Issued
share
capital
|
Share
premium
account
|
Equity
reserve
|
Hedging
and
translation
reserve
|
Retained
earnings
|
Own
shares
|
Total
equity
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Balance at 1 January 2015
|
41.8
|
14.8
|
5.7
|
(7.2)
|
359.0
|
(2.5)
|
411.6
|
|
Profit for the period
|
-
|
-
|
-
|
-
|
35.3
|
-
|
35.3
|
|
Gains on cash flow hedges
|
-
|
-
|
-
|
0.3
|
-
|
-
|
0.3
|
|
Exchange differences on translation of foreign operations
|
-
|
-
|
-
|
(12.8)
|
-
|
-
|
(12.8)
|
|
Tax relating to components of other comprehensive income
|
-
|
-
|
-
|
-
|
0.4
|
-
|
0.4
|
|
Total comprehensive income for the period
|
-
|
-
|
-
|
(12.5)
|
35.7
|
-
|
23.2
|
|
Issue of share capital
|
0.1
|
-
|
(0.1)
|
-
|
-
|
-
|
-
|
|
Share-based payment charge
|
-
|
-
|
0.9
|
-
|
-
|
-
|
0.9
|
|
Purchase of shares held by employee benefit trust
|
-
|
-
|
-
|
-
|
-
|
(0.9)
|
(0.9)
|
|
Use of shares held by employee benefit trust
|
-
|
-
|
-
|
-
|
(1.2)
|
1.2
|
-
|
|
Transfer to retained earnings
|
-
|
-
|
(3.3)
|
-
|
3.3
|
-
|
-
|
|
Dividends paid
|
-
|
-
|
-
|
-
|
(16.6)
|
-
|
(16.6)
|
|
Balance at 30 June 2015
|
41.9
|
14.8
|
3.2
|
(19.7)
|
380.2
|
(2.2)
|
418.2
|
Condensed Consolidated Cash Flow Statement
For the half-year ended 30 June 2016
|
|
Notes
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2015
|
Year
ended
31 Dec
2015
|
|
|
|
£m
|
£m
|
£m
|
|
Net cash from operating activities
|
11a)
|
39.5
|
47.4
|
99.4
|
|
Investing activities
|
|
|
|
|
|
Interest received
|
|
0.1
|
0.1
|
0.2
|
|
Proceeds on disposal of property, plant and equipment
|
|
0.5
|
0.5
|
0.7
|
|
Purchases of property, plant and equipment
|
|
(21.9)
|
(22.3)
|
(46.4)
|
|
Purchases of intangible assets
|
|
(0.9)
|
(1.0)
|
(2.2)
|
|
Proceeds on disposal of business
|
13
|
1.5
|
-
|
-
|
|
Acquisition of Steico
|
|
-
|
-
|
(60.3)
|
|
Acquisition of LPE
|
|
-
|
(43.6)
|
(43.6)
|
|
Loan to joint venture
|
|
-
|
-
|
(0.1)
|
|
Net cash used in investing activities
|
|
(20.7)
|
(66.3)
|
(151.7)
|
|
Financing activities
|
|
|
|
|
|
Dividends paid
|
|
(18.3)
|
(16.6)
|
(24.3)
|
|
New loans
|
|
26.9
|
78.4
|
179.9
|
|
Repayment of borrowings
|
|
(28.9)
|
(27.2)
|
(98.2)
|
|
Repayments of obligations under finance leases
|
|
(0.4)
|
(0.3)
|
(0.6)
|
|
Share issues
|
|
-
|
-
|
-
|
|
Purchase of shares held by employee benefit trust
|
|
(1.0)
|
(0.9)
|
(0.9)
|
|
Net cash (used in)/ from financing activities
|
|
(21.7)
|
33.4
|
55.9
|
|
Net (decrease)/ increase in cash and cash equivalents
|
|
(2.9)
|
14.5
|
3.6
|
|
Cash and cash equivalents at beginning of period
|
|
11.6
|
8.5
|
8.5
|
|
Effect of foreign exchange rate changes
|
|
1.9
|
(1.0)
|
(0.5)
|
|
Cash and cash equivalents at end of period
|
11a)
|
10.6
|
22.0
|
11.6
|
Notes to the Condensed Consolidated Interim Financial Statements
1. General information
These Condensed Consolidated Interim Financial Statements, which were approved by the Board of
Directors on 29 July 2016, have been reviewed by the auditor, whose report is set out after the Directors' Responsibility Statement.
The comparative figures for the year ended 31 December 2015 do not constitute the Group's
statutory accounts for 2015 as defined in Section 434 of the Companies Act 2006. Statutory accounts for 2015 have been
delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified, did not draw attention to
any matters by way of emphasis and did not contain statements under Sections 498(2) or (3) of the Companies Act 2006.
2. Accounting policies
These Condensed Consolidated Interim Financial Statements have been prepared in accordance with
the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 "Interim Financial Reporting" as adopted
by the European Union. The Directors have, at the time of approving these Condensed Consolidated Interim Financial
Statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the
foreseeable future, a period of at least 12 months from this reporting date. Accordingly, they continue to adopt the going
concern basis of accounting in preparing these Condensed Consolidated Interim Financial Statements.
The accounting policies, presentation and methods of computation adopted in the preparation of
these Condensed Consolidated Interim Financial Statements are consistent with those followed in the preparation of the Group's
Annual Financial Statements for the year ended 31 December 2015 which were prepared in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union. They do not include all the information required for full
annual financial statements and should be read in conjunction with the Consolidated Financial Statements of the Group as at and
for the year ended 31 December 2015. No material new standards, amendments to standards or
interpretations are effective for the half-year ended 30 June 2016.
The preparation of interim financial statements requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and
expense. The resulting accounting estimates will, by definition, seldom equal the related actual results. In
preparing these Condensed Consolidated Interim Financial Statements, the significant judgements made by management in applying
the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the
Consolidated Financial Statements as at and for the year ended 31 December 2015.
3. Segmental analysis
The Group reports its segment information as two operating Divisions according to the market
segments they serve, Aerospace and Flexonics. For management purposes, the Aerospace Division is managed as two
sub-divisions, Aerostructures and Fluid Systems, in order to enhance management oversight; however, these are aggregated as one
reporting segment in accordance with IFRS 8. The Flexonics Division is managed as a single division.
There has been no change in the basis of segmentation or in the basis of measurement of segment
profit or loss in the period.
Adjusted operating profit, as described in Note 4, is the key measure reported to the Group's
Executive Committee for the purpose of resource allocation and assessment of segment performance. Investment income,
finance costs and tax are not allocated to segments, as this type of activity is driven by the central tax and treasury
function.
Segment assets include directly attributable computer software assets, property, plant and
equipment, and working capital assets. Goodwill, intangible assets from acquisitions, cash, deferred and current tax, and
other financial assets (except for working capital) are not allocated to segments for the purposes of reporting financial
performance to the Group's Executive Committee.
Segment liabilities include directly attributable trade payables and accruals. Debt, finance
lease obligations, deferred and current tax and retirement benefit obligations are not allocated to segments for the purposes of
reporting financial performance to the Group's Executive Committee.
Business Segments
Segment information for revenue, operating profit and a reconciliation to entity net profit is
presented below.
|
|
Aerospace
|
Flexonics
|
Eliminations
/ central
costs
|
Total
|
Aerospace
|
Flexonics
|
Eliminations
/ central
costs
|
Total
|
|
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2015
|
Half-year
ended
30 June
2015
|
Half-year
ended
30 June
2015
|
Half-year
ended
30 June
2015
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
External revenue
|
323.7
|
126.8
|
-
|
450.5
|
287.2
|
147.3
|
-
|
434.5
|
|
Inter-segment revenue
|
0.1
|
0.1
|
(0.2)
|
-
|
0.1
|
0.1
|
(0.2)
|
-
|
|
Total revenue
|
323.8
|
126.9
|
(0.2)
|
450.5
|
287.3
|
147.4
|
(0.2)
|
434.5
|
|
Adjusted trading profit
|
41.1
|
10.8
|
(4.9)
|
47.0
|
37.9
|
22.3
|
(4.2)
|
56.0
|
|
Share of joint venture profit
|
-
|
0.2
|
-
|
0.2
|
-
|
0.2
|
-
|
0.2
|
|
Adjusted operating profit
|
41.1
|
11.0
|
(4.9)
|
47.2
|
37.9
|
22.5
|
(4.2)
|
56.2
|
|
Profit/(loss) on sale and write-down of fixed assets
|
0.1
|
-
|
-
|
0.1
|
(0.8)
|
-
|
-
|
(0.8)
|
|
Amortisation of intangible assets from acquisitions
|
(5.6)
|
(4.2)
|
-
|
(9.8)
|
(2.6)
|
(2.8)
|
-
|
(5.4)
|
|
Acquisition costs
|
-
|
-
|
-
|
-
|
-
|
(0.9)
|
-
|
(0.9)
|
|
Operating profit
|
35.6
|
6.8
|
(4.9)
|
37.5
|
34.5
|
18.8
|
(4.2)
|
49.1
|
|
Investment income
|
|
|
|
0.1
|
|
|
|
0.1
|
|
Finance costs
|
|
|
|
(5.0)
|
|
|
|
(4.2)
|
|
Profit before tax
|
|
|
|
32.6
|
|
|
|
45.0
|
|
Tax
|
|
|
|
(6.1)
|
|
|
|
(9.7)
|
|
Profit after tax
|
|
|
|
26.5
|
|
|
|
35.3
|
Segment information for assets and a reconciliation to total assets and for liabilities and a
reconciliation to total liabilities is presented below.
|
|
30 June
2016
|
30 June
2015
|
31 Dec
2015
|
|
Assets
|
£m
|
£m
|
£m
|
|
Aerospace
|
405.1
|
303.1
|
346.6
|
|
Flexonics
|
144.1
|
140.0
|
128.9
|
|
Central
|
4.5
|
3.6
|
4.4
|
|
Segment assets for reportable segments
|
553.7
|
446.7
|
479.9
|
|
Unallocated
|
|
|
|
|
Goodwill
|
305.8
|
275.2
|
284.5
|
|
Intangible assets from acquisitions
|
62.6
|
46.5
|
67.9
|
|
Cash
|
13.5
|
22.0
|
14.4
|
|
Deferred and current tax
|
10.4
|
1.4
|
11.8
|
|
Others
|
3.3
|
3.6
|
2.8
|
|
Total assets per Balance Sheet
|
949.3
|
795.4
|
861.3
|
|
|
30 June
2016
|
30 June
2015
|
31 Dec
2015
|
|
Liabilities
|
£m
|
£m
|
£m
|
|
Aerospace
|
110.8
|
88.9
|
91.3
|
|
Flexonics
|
46.7
|
51.0
|
37.8
|
|
Central
|
7.2
|
9.5
|
9.4
|
|
Segment liabilities for reportable segments
|
164.7
|
149.4
|
138.5
|
|
Unallocated
|
|
|
|
|
Debt
|
219.4
|
165.3
|
207.2
|
|
Finance leases
|
1.4
|
2.2
|
1.8
|
|
Deferred and current tax
|
72.8
|
42.5
|
67.4
|
|
Retirement benefit obligations
|
17.0
|
15.1
|
12.6
|
|
Others
|
2.3
|
2.7
|
2.9
|
|
Total liabilities per Balance Sheet
|
477.6
|
377.2
|
430.4
|
4. Adjusted operating profit and adjusted profit before tax
The provision of adjusted operating profit and adjusted profit before tax measures, derived in
accordance with the table below, has been included to identify the performance of the Group prior to the impact of goodwill
impairment, impairment of assets held for sale, amortisation of intangible assets acquired from acquisitions, acquisition costs
and profit or loss on sale and write-down of fixed assets. These items have been excluded from the adjusted measures in
order to show the underlying current business performance of the Group in a consistent manner. This also reflects how the
business is managed on a day-to-day basis.
|
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2015
|
Year
ended
31 Dec
2015
|
|
|
£m
|
£m
|
£m
|
|
Operating profit
|
37.5
|
49.1
|
72.3
|
|
Amortisation of intangible assets from acquisitions
|
9.8
|
5.4
|
12.2
|
|
Goodwill impairment
|
-
|
-
|
18.8
|
|
Impairment of assets held for sale
|
-
|
-
|
1.8
|
|
Acquisition costs
|
-
|
0.9
|
1.2
|
|
(Profit)/loss on sale and write-down of fixed assets
|
(0.1)
|
0.8
|
1.5
|
|
Adjustments to operating profit
|
9.7
|
7.1
|
35.5
|
|
Adjusted operating profit
|
47.2
|
56.2
|
107.8
|
|
|
|
|
|
|
Profit before tax
|
32.6
|
45.0
|
63.8
|
|
Adjustments to profit before tax as above
|
9.7
|
7.1
|
35.5
|
|
Adjusted profit before tax
|
42.3
|
52.1
|
99.3
|
5. Tax charge
|
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2015
|
|
|
£m
|
£m
|
|
Current tax:
|
|
|
|
Current year
|
3.3
|
7.7
|
|
Deferred tax:
|
|
|
|
Current year
|
2.8
|
2.0
|
|
|
6.1
|
9.7
|
Corporation tax for the half-year ended 30 June 2016 is calculated at 18.7% (H1 2015 - 21.6%) on
profit before tax. On adjusted profit before tax, an adjusted tax rate of 20.0% (H1 2015 - 21.0%) is charged, representing
the estimate of the weighted average annual corporation tax rate expected for the full financial year.
6. Dividends
|
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2015
|
|
|
£m
|
£m
|
|
Amounts recognised as distributions to equity holders in the period:
|
|
|
|
Final dividend for the year ended 31 December 2015 of 4.36p (2014 - 3.96p) per
share
|
18.3
|
16.6
|
|
Interim dividend for the year ending 31 December 2016 of 1.95p (2015 - 1.84p) per
share
|
8.2
|
7.7
|
The interim dividend was approved by the Board of Directors on 29 July 2016 and has not been
included as a liability in these Interim Financial Statements.
7. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following
data:
|
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2015
|
|
Number of shares
|
million
|
million
|
|
Weighted average number of ordinary shares for the purposes of basic earnings per
share
|
418.8
|
417.8
|
|
Effect of dilutive potential ordinary shares:
|
|
|
|
Share options
|
4.5
|
4.8
|
|
Weighted average number of ordinary shares for the purposes of diluted earnings per
share
|
423.3
|
422.6
|
|
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2015
|
Half-year
ended
30 June
2015
|
|
|
Earnings
|
EPS
|
Earnings
|
EPS
|
|
Earnings and earnings per share ("EPS")
|
£m
|
pence
|
£m
|
pence
|
|
Profit for the period
|
26.5
|
6.33
|
35.3
|
8.45
|
|
Adjust:
|
|
|
|
|
|
Amortisation of intangible assets from acquisitions net of tax of £2.4m (H1 2015 -
£0.9m)
|
7.4
|
1.77
|
4.5
|
1.07
|
|
Acquisition costs net of tax of £nil (H1 2015 - £nil)
|
-
|
-
|
0.9
|
0.22
|
|
(Profit)/loss on sale and write-down of fixed assets net of tax of £nil (H1 2015 -
£0.3m)
|
(0.1)
|
(0.03)
|
0.5
|
0.12
|
|
Adjusted earnings after tax
|
33.8
|
8.07
|
41.2
|
9.86
|
|
Earnings per share
|
|
|
|
|
|
- basic
|
|
6.33p
|
|
8.45p
|
|
- diluted
|
|
6.26p
|
|
8.35p
|
|
- adjusted
|
|
8.07p
|
|
9.86p
|
|
- adjusted and diluted
|
|
7.98p
|
|
9.75p
|
The earnings figures used to calculate both the basic earnings per share and the diluted earnings
per share are the same.
The denominators used for all basic, diluted and adjusted earnings per share are as detailed in
the "Number of shares" table.
The provision of an adjusted earnings per share, derived in accordance with the table, has been
included to identify the performance of the Group prior to the impact of amortisation of intangible assets acquired from
acquisitions, acquisition costs and profit or loss on sale and write-down of fixed assets. These items have been excluded
from the adjusted measures in order to show the underlying current business performance of the Group in a consistent manner.
This also reflects how the business is managed on a day-to-day basis.
8. Goodwill
Goodwill has been reallocated to the two Aerospace sub-divisions and Flexonics with effect from 1
January 2016, reflecting the way management now exercises oversight and monitors the Group's performance. The Group tests
goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.
The change in goodwill from £284.5m at 31 December 2015 to £305.8m at 30 June 2016 reflects an
increase of £21.3m due to foreign exchange differences.
9. Property, plant and equipment
During the period, the Group spent £21.9m (H1 2015 - £22.3m) on the acquisition of property, plant
and equipment. The Group also disposed of machinery with a carrying value of £0.4m (H1 2015 - £0.6m) for proceeds of £0.5m
(H1 2015 - £0.5m).
10. Share capital
Share capital as at 30 June 2016 amounted to £41.9m. No shares were issued during the
period.
11. Notes to the cash flow statement
a) Reconciliation of operating profit to net cash from operating activities
|
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2015
|
|
|
£m
|
£m
|
|
Operating profit
|
37.5
|
49.1
|
|
Adjustments for:
|
|
|
|
Depreciation of
property, plant and equipment
|
15.3
|
13.2
|
|
Amortisation of
intangible assets from acquisitions
|
9.8
|
5.4
|
|
Amortisation of other
intangible assets
|
0.8
|
0.4
|
|
(Profit)/loss on sale
and write-down of fixed assets
|
(0.1)
|
0.8
|
|
Costs on disposal of
business
|
(0.2)
|
-
|
|
Share of joint
venture
|
(0.2)
|
(0.2)
|
|
Share-based payment
charges
|
0.4
|
0.9
|
|
Pension payments in
excess of service cost
|
(4.4)
|
(4.5)
|
|
Operating cash flows before movements in working capital
|
58.9
|
65.1
|
|
(Increase) / decrease
in inventories
|
(7.5)
|
0.4
|
|
Increase in
receivables
|
(14.4)
|
(8.0)
|
|
Increase / (decrease)
in payables
|
9.0
|
(1.6)
|
|
Working capital
currency movements
|
(0.5)
|
(0.1)
|
|
Cash generated by operations
|
45.5
|
55.8
|
|
Income taxes paid
|
(1.4)
|
(4.4)
|
|
Interest paid
|
(4.6)
|
(4.0)
|
|
Net cash from operating activities
|
39.5
|
47.4
|
|
|
|
|
|
Cash
|
13.5
|
22.0
|
|
Overdrafts
|
(2.9)
|
-
|
|
Total
|
10.6
|
22.0
|
Cash and cash equivalents (which are presented as a single class of assets on the face of the
Balance Sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or
less.
b) Free cash flow
Free cash flow, a non-IFRS item, highlights the total net cash generated by the Group prior to
corporate activity such as acquisitions, disposals, financing and transactions with shareholders. It is derived as
follows:
|
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2015
|
|
|
£m
|
£m
|
|
Net cash from operating activities
|
39.5
|
47.4
|
|
Interest received
|
0.1
|
0.1
|
|
Proceeds on disposal of property, plant and equipment
|
0.5
|
0.5
|
|
Purchases of property, plant and equipment
|
(21.9)
|
(22.3)
|
|
Purchase of intangible assets
|
(0.9)
|
(1.0)
|
|
Free cash flow
|
17.3
|
24.7
|
c) Analysis of net debt
|
|
At
1 January
2016
|
Cash flow
|
Non- Cash Items
|
Exchange
movement
|
At
30 June
2016
|
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Cash
|
14.4
|
(2.5)
|
-
|
1.6
|
13.5
|
|
Overdrafts
|
(2.8)
|
(0.4)
|
-
|
0.3
|
(2.9)
|
|
Cash and cash equivalents
|
11.6
|
(2.9)
|
-
|
1.9
|
10.6
|
|
Debt due within one year
|
(25.8)
|
5.8
|
(40.4)
|
(2.0)
|
(62.4)
|
|
Debt due after one year
|
(178.6)
|
(3.8)
|
40.4
|
(12.1)
|
(154.1)
|
|
Finance leases
|
(1.8)
|
0.4
|
-
|
-
|
(1.4)
|
|
Total
|
(194.6)
|
(0.5)
|
-
|
(12.2)
|
(207.3)
|
12. Retirement benefit schemes
Aggregate post-retirement benefit obligations are £17.0m (30 June 2015 - £15.1m; 31 December 2015
- £12.6m). This liability is made up of net deficits in the Group's UK and US defined benefit pension schemes, with
deficits of £2.7m (30 June 2015 - £4.6m; 31 December 2015 - £0.6m) and £8.0m (30 June 2015 - £5.3m; 31 December 2015 - £6.5m)
respectively, and a liability on unfunded schemes of £6.3m (30 June 2015 - £5.2m; 31 December 2015
- £5.5m). These values have been assessed by independent actuaries using current market values and
discount rates.
13. Disposals
On 16 February 2016 the Group sold its Senior Aerospace Composites business which was based in
Wichita, Kansas, USA and included in the Aerospace Division. The business had been classified as held for sale at 31
December 2015 and presented separately in the balance sheet. An impairment of assets held for sale of £1.8m had also been
recognised in the year ended 31 December 2015.
During the half-year ended 30 June 2016, a loss of £nil (H1 2015 - £nil) arose on disposal after
taking into account the fair value of net assets disposed after exit costs of £1.9m offset by cash consideration of £1.5m and the
previously recorded foreign exchange gain that has been recycled to the income statement of £0.4m.
14. Contingent Liabilities
Contingent liabilities exist in respect of guarantees provided by the Group in the ordinary course
of business for product delivery, performance and reliability. Various Group undertakings are parties to legal actions or
claims which arise in the ordinary course of business, some of which could be for substantial amounts. In May 2015 Senior
Aerospace Ketema was named as co-defendant in a class action lawsuit filed against Ametek, Inc. in the US. The lawsuit
claims that Ametek had polluted the groundwater during its tenure as owners of the site where Senior Aerospace Ketema is
currently located. While the outcome of some of these matters cannot precisely be foreseen, based on the information
currently held by the Directors, the Directors do not believe any of these arrangements, legal actions or claims, after allowing
for provisions already made, are likely to result in significant loss to the Group.
15. Financial Instruments
Categories of financial instruments
|
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2015
|
|
|
£m
|
£m
|
|
Carrying value of financial assets:
|
|
|
|
Cash and cash equivalents
|
13.5
|
22.0
|
|
Trade receivables
|
150.9
|
134.0
|
|
Other receivables
|
2.5
|
2.0
|
|
Loans and receivables at amortised cost
|
166.9
|
158.0
|
|
Currency derivatives used for hedging
|
2.1
|
1.0
|
|
Total financial assets
|
169.0
|
159.0
|
|
|
|
|
|
Carrying value of financial liabilities:
|
|
|
|
Bank overdrafts and loans
|
219.4
|
165.3
|
|
Obligations under finance leases
|
1.4
|
2.2
|
|
Trade payables
|
91.7
|
84.2
|
|
Other payables
|
60.4
|
59.0
|
|
Other financial liabilities at amortised cost
|
372.9
|
310.7
|
|
Currency derivatives used for hedging
|
10.2
|
3.0
|
|
Total financial liabilities
|
383.1
|
313.7
|
|
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2015
|
|
|
£m
|
£m
|
|
Undiscounted contractual maturity of other financial liabilities:
|
|
|
|
Amounts payable:
|
|
|
|
On demand or within one year
|
227.0
|
192.1
|
|
In the second to fifth years inclusive
|
113.3
|
124.7
|
|
After five years
|
68.0
|
13.2
|
|
|
408.3
|
330.0
|
|
Less: future finance charges
|
(35.4)
|
(19.3)
|
|
Other financial liabilities at amortised cost
|
372.9
|
310.7
|
The carrying amount is a reasonable approximation of fair value for the financial assets and
liabilities noted above except for bank overdrafts and loans, where the Directors estimate the fair value to be £232.1m (30 June
2015 - £174.4m). The fair value has been determined by applying a make-whole calculation using prevailing treasury bill
yields plus the applicable credit spread for the Group.
Fair values
The following table presents an analysis of financial instruments that are measured subsequent to
initial recognition at fair value. All financial instruments are measured at level 2, i.e. those fair values derived from
inputs other than quoted prices that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices). There has not been any transfer of assets or liabilities between levels. There are no
non-recurring fair value measurements.
|
|
Half-year
ended
30 June
2016
|
Half-year
ended
30 June
2015
|
|
|
£m
|
£m
|
|
Assets:
|
|
|
|
Foreign exchange contracts - cash flow hedges
|
2.1
|
1.0
|
|
Total assets
|
2.1
|
1.0
|
|
Liabilities:
|
|
|
|
Foreign exchange contracts - cash flow hedges
|
10.2
|
3.0
|
|
Total liabilities
|
10.2
|
3.0
|